CHANDLER, Ariz. — (BUSINESS WIRE) — October 9, 2014 —
Microchip Technology Incorporated (NASDAQ:
MCHP), a leading provider of
microcontroller, mixed signal, analog and Flash-IP solutions, announced
today that it expects net sales for its second quarter of fiscal 2015
ending September 30, 2014 to be about $546.2 million, which includes
about $16.9 million from the recent ISSC acquisition. On July 31, 2014,
Microchip provided guidance of net sales to be $560.0 million to $575.9
million which included $18 million from the ISSC acquisition. Excluding
the ISSC acquisition, Microchip’s net sales in the September 2014
quarter are expected to be $529.3 million, which is down 0.4%
sequentially on a non-GAAP basis and up 0.1% on a GAAP basis. There is
no difference in GAAP and non-GAAP net sales in the September 2014
quarter. However, in the June 2014 quarter there was a difference in the
GAAP and non-GAAP net sales from our acquisition of Supertex of $2.5
million as GAAP does not recognize revenue on the sell through of
product sitting in the distribution channel on the date an acquisition
occurs but Microchip includes this in its non-GAAP results. There will
be no conference call in conjunction with this press release.

“We were disappointed with the level of business activity in the
September quarter. The September quarter is usually a back-end weighted
quarter because of a traditional weak August due to holidays in various
parts of the world. The month of September is usually a strong month for
our revenue after the summer holiday period. This time, the September
sales did not materialize to our expectations. The revenue miss was led
by China where the September quarter is traditionally the strongest.
This time, sales in China, excluding ISSC, are expected to be down
sequentially,” said Steve Sanghi, Microchip’s President and CEO.

Mr. Sanghi added, “Microchip often sees the turn of the industry ahead
of others in the semiconductor industry. First, in contrast to many
others in the industry, we report sales from distribution on a
sell-through basis worldwide. We built a significant amount of inventory
in the distribution channel in the September quarter. If, like many
others in the industry, we recognized sales on a sell-in basis to our
distributors, our sales would have been significantly higher for the
September quarter. Second, Microchip does business with over 80,000
customers worldwide, most of whom are small and nimble and are able to
adjust their demand in real time. We believe that another industry
correction has begun and that this correction will be seen more broadly
across the industry in the near future.”

“While we are reducing our production levels in our wafer fabs and
assembly and test facilities, we are continuing to ramp production on
our new technologies where we have been capacity constrained. We believe
that we will be able to catch up on the capacity constraints during the
December quarter and lead times should return to normal. The December
quarter is seasonally our weakest quarter of the year. During typical
industry corrections, we have returned to sequential revenue growth
after two quarters and we currently expect the same this time,” added
Mr. Sanghi.

The statements in this release relating to our expected net sales for
the September 2014 quarter (including sales from ISSC), the September
quarter being back-end weighted, the month of September usually being
strong including in China, sales in China expected to be down
sequentially, that Microchip often sees the turn of the industry ahead
of others, that if we recognized sales on a sell-in basis to our
distributors our sales would have been significantly higher for the
September quarter, our customers being able to adjust their demand in
real time, that another industry correction has begun and that this
correction will be seen more broadly across the industry in the near
future, reducing our production levels, continuing to ramp production on
new technologies, being able to catch up on capacity constraints in the
December quarter, lead times returning to normal, the December quarter
being the seasonally weakest quarter of the year, and expecting to
return to sequential revenue growth after two quarters are
forward-looking statements made pursuant to the safe harbor provisions
of the Private Securities Litigation Reform Act of 1995. These
statements involve risks and uncertainties that could cause our actual
results to differ materially, including, but not limited to: any
continued economic weakness; any unexpected fluctuations or weakness in
the U.S. or global economies (including China); changes in demand or
market acceptance of our products and the products of our customers; the
mix of inventory we hold and our ability to satisfy short-term orders
from our inventory; changes in utilization of our manufacturing capacity
and our ability to effectively manage our production levels; our ability
to complete our acquisition of the remaining shares of ISSC; our ability
to realize the expected benefits of our acquisitions (including our
recent acquisitions of Supertex and ISSC); competitive developments;
supply of wafers from third party wafer foundries and the cost of such
wafers; the costs and outcome of any current or future tax audit or any
litigation involving intellectual property, customers or other issues;
our actual average stock price in the September 2014 quarter and the
impact such price will have on our share count; disruptions in our
business or the businesses of our customers or suppliers due to natural
disasters (including any floods in Thailand), terrorist activity, armed
conflict, war, worldwide oil prices and supply, public health concerns
or disruptions in the transportation system; and general economic,
industry or political conditions in the United States or
internationally. In addition, the preliminary results in this press
release are subject to any adjustments that may be made in connection
with our quarterly financial accounting closing procedures.